MCA NO 30445 OF 2024 CMC VGK OUTOMOBILES

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA DAR ES SALAAM SUB REGISTRY AT DAR ES SALAAM CIVIL APPEAL NO. 30445 OF 2024 (Arising from the Judgment and Decree of the Resident Magistrate’s Court of Dar es Salaam at Kisutu (Hon. Mhini, SRM) in Small Claim Case No. 5440 of 2024 dated 15th November 2024) _____________________________ CMC AUTOMOBILES LIMITED……………………….…………APPELLANT VERSUS VGK COMPANY LIMITED….………………………………….RESPONDENT JUDGEMENT Date of last order: 18th February 2025 Date of Judgement: 3rd April 2025 MTEMBWA, J.: According to the statement of the claim, sometime in November 2022, the Appellant entered into an agreement with the Respondent in which the former agreed to supply the latter with a new vehicle, make Ford Eco Sport Auto Transmutation with chassis No. MAJBXXMRKBFU22535 for the sum of twenty-six thousand one hundred and twenty United States Dollars (USD 26,120.00). The agreement was such that the Respondent would pay 30% upfront, and the remaining balance would be paid by installments within eleven months. 1 It was further revealed that the Respondent paid the advance sum as agreed, and accordingly, the vehicle was handed to her. It was later registered as T319 EBD. Furthering the agreement, the Respondent paid a total of USD 24,597 as part payment for the vehicle. In October 2023, the Respondent submitted the vehicle to the Appellant for normal service as agreed, and later, she collected it. However, when it was driven, it was discovered that it was not roadworthy, and such a defect was reported to the Appellant, who took it for maintenance. On 28th October 2023, the vehicle was returned to the Respondent after maintenance. On 10th November 2023, the vehicle encountered another heavy blow, where the engine stopped working permanently. The defect was communicated to the Appellant, who collected the vehicle for maintenance. Later on, the Appellant admitted the irreparability of the engine and promised to replace it with a new one. On 24th January 2024, the Respondent was required to collect the repaired vehicle. Initially, on 18th January 2024, the Respondent officially informed the Appellant that she was no longer interested in the vehicle. She claimed a breach of contract. The Appellant resisted the claim. During hearing, the following issues were framed: one, whether there was a breach of the contract; two, whether the Respondent suffered damages; and three, what reliefs the 2 Parties were entitled to. Having gathered the evidence presented during hearing, the claim was decided in favor of the Respondent. Dissatisfied, the Appellant has laid before this Court the following grounds of appeal and I quote; 1. That, the Trial Magistrate erred in law and fact by failing to evaluate and analyze the evidence adduced by the Appellant. 2. That, the Trial Magistrate erred in law and fact by holding that the Appellant breached the sale agreement due to the failure of engine while the motor vehicle was under active warranty. 3. That, the Trial Magistrate erred in law and fact by failing to understand the concept of warranty and its applicability in business transactions. 4. That, the Trial Magistrate erred in law and fact by holding that it is unexpected for a brand-new car to have serious mechanical failure of engine within the warranty period of ten months after purchase. 5. That, the Trial Magistrate erred in law and in fact by awarding USD 10,000 as general damages without any justification. When the matter came for orders on 18th February 2025, the Appellant was represented by Mr. Deus Tarimo, the learned counsel, who also had the briefs of Mr. Wilson Mafie, the learned counsel for the Respondent. When prompted, Mr. Tarimo agreed to argue the appeal by 3 way of written submissions. Having reviewed the records, I am satisfied that the parties adhered to the agreed schedule to which I intensely subscribe. Arguing on the first ground of appeal, Mr. Tarimo faulted the trial Court for failure to analyze the evidence adduced during hearing and, as a result, reached to an unjust and wrong decision. He added that the trial Court was duty bound to examine and evaluate the evidence tabled critically and assess its weight in relation to the matter before it. He then cited the case of Harold L. Kwesigabo vs. National Insurance Corporation [2003] TLR 55. He added that the records show that the vehicle in dispute was brand new, with the manufacturer’s test mileage of 38 kilometers on the odometer. Being the brand-new car was placed under active warrant by the manufacturer for any mechanical defect within three years from the date of purchase or 100,000 kilometers, whichever comes first. Up to November 2023, when it was taken to the Appellant for maintenance due to engine failure, it had already covered running kilometers of 16572, and the same was serviced under warranty cover, as per Exhibit D2 (repair/job card). The learned counsel observed that the Appellant, the dealer or agent of the manufacturer, used to service and maintain the vehicle for 4 eleven months when the car was in the Respondent's use and possession. By that time, the car was being serviced and maintained by the Appellant free of charge because it was still covered under the active warrant and service plan schedule. He contended that the event of engine failure does not constitute a breach of the sale agreement anymore. Instead, it is a mechanical defect covered under the manufacturer's warranty, and in honoring the terms of the warranty, the manufacturer accepted the liability and supplied a new engine to replace the defective one. Mr. Tarimo faulted the trial Court's findings on pages 9 to 10 of the typed judgment script that the Appellant breached the sale agreement because the engine was damaged within the warranty period. He considered the approach wrong. He added that it is undisputed that the vehicle was brand new and the mechanical defect was normal because it had been in use for more than 10 months, covering 16,572 kilometers. The learned counsel insisted that the manufacturer accepted the liability as per the warranty and replaced the damaged engine with a new one. Thus, since 24th January 2024, the car has been roadworthy and ready for collection for the Respondent’s use. He reiterated that the Appellant had not breached the agreement under the circumstances. 5 Mr. Tarimo compressed the second and fourth grounds of appeal and argued them together. He contended that the trial Magistrate erred in law and fact by holding that the Appellant breached the sale agreement due to the failure of the engine while the motor vehicle was under active warranty. Stretching further, the learned counsel observed that the vehicle was purchased from the Appellant as the dealer or agent of the manufacturer (Ford Company Limited) by an agreement executed on 5th December 2022. It was then handled to the Respondent in its road-worthy condition with registration No. T 310 EBD. It was used for approximately eleven months, from December 2022 to November 2023. In such circumstances, being a mechanical machine, it can experience engine failure at any time, but then, the defect was rectified by replacing the engine at the manufacturer’s costs. In the premises, there was no breach of contract. On the third ground of appeal, Mr. Tarimo submitted that the trial Magistrate erred in law and fact by failing to understand the concept of warranty and its applicability in business transactions. He argued further that the Appellant purchased a brand-new car, which was registered and used by the Respondent for the first time. That being the case and for more assurance, the Appellant, as the agent or dealer of the 6 manufacturer, covered the car with a service maintenance plan for 36 months or 60,000 kilometers as per Exhibit D1. The manufacturer also covered the vehicle with the standard mechanical warrant for three (3) years or 100,000 kilometers, whichever comes first, as per Exhibit D2. Close to that, the learned observed that the purpose and concept of the warrant of merchantability in a business transaction connote a guarantee based on the assumption that the product will be functioning as intended. The manufacturer is promising a certain level of quality and functionality of the product within a certain period or other conditions. In case of any defect, the manufacturer shall bear the liability, as the Appellant did to replace the failed engine with a new one. The fact that the car experienced mechanical problems with engine failure within the warrant period does not mean that it was not brand new or that the Appellant breached the terms of the sale agreement. Similarly, being under warrant for three years or 100,000 kilometers does not mean it will not experience mechanical failure within that period. Arguing on the fifth ground of appeal, Mr. Tarimo faulted the trial Magistrate for awarding USD 10,000 as general damages without any justification. He contended further that the trial Court reached the wrong conclusion that the Appellant had breached the sale agreement and 7 awarded the Respondent general damages of USD 10,000, equivalent to more than Tanzania Shillings 25,000,000/=. He considered the amount awarded to be exorbitant, unrealistic, and unjustifiable. Close to that, he added that awarding damages is at the discretion of the Court, but it has to be exercised judiciously to maintain fair justice. Based on the foregoing arguments and cited authorities, the learned counsel implored this Court to allow the appeal with costs. In response to the first ground of appeal, Mr. Mafie argued that the trial court correctly evaluated and analyzed the evidence adduced by the Appellant. He considered the ground of appeal unmerited because the trial Court carefully assessed the evidence presented by both parties, including the testimony of witnesses and the documentary evidence. Ultimately, it was correctly resolved that the Appellant breached the sale agreement by selling a vehicle unsuitable for the intended purpose. He supported the trial Court's findings based on the evidence that the vehicle’s engine failed within ten months of purchase, which was inconsistent with the representation that it was a brand-new vehicle. In response to the second and fourth grounds of appeal, Mr. Mafie argued that the trial Court correctly concluded that the Appellant breached the sale agreement by selling the unroadworthy vehicle. The 8 fact that the vehicle was under warranty does not exonerate the Appellant from liability for breach of contract. He referred this Court to the Sale of Goods Act, Cap. 214 R.E. 2002, which provides that goods sold must be of merchantable quality and fit for the purpose for which they were sold. He added further that the vehicle in question was not fit for the intended purpose, which is why there was engine failure within ten months. He supported the trial court's finding that it was unexpected for a brand-new vehicle to experience such a serious mechanical failure within such a short period. Further, due to the change of the said engine, which is a serious mechanical failure, the Respondent had lost trust in such a car, and that’s why she sought a refund of the purchase amount or an alternative vehicle, even if it would require a top-up amount. Regarding the third ground of appeal, Mr. Mafie argued that the trial Court correctly conceptualized the warranty concept and its applicability. He supported the trial Court's finding that the warranty is not an open-ended document; it must itemize what it covers. In his understanding, it did not cover the fundamental breach of contract. It was contended further that the vehicle's engine is the heart; thus, once it is changed, it will never be the same again. He cited the case of Frank 9 Peter Mashauri vs. Be Forward Tanzania Limited, Civil case No. 1535 of 2024. For the foregoing arguments and cited authorities, the learned counsel for the Respondent beseeched this Court to dismiss the appeal with costs. Mr. Tarimo complied with the scheduling order by filing the rejoinder submissions. Having reviewed them, I am satisfied that they are a replica of his submissions in chief. I will thus not reproduce them here. It suffices here to note that I have considered them in this Judgement. Having carefully considered the parties' rival arguments, the question would be whether the appeal is meritorious. In determining this Appeal, I shall also seek the guidance of the Court of Appeal of Tanzania in Mapambano Michael @ Mayanga vs. Republic, Criminal Appeal No. 258 of 2015, where it was observed that the first appellate Court must subject the entire evidence on record to a fresh re-evaluation to arrive at a decision and that it may coincide with the trial Court or may be different altogether. While guided by the above principle, it is also a trite law that whoever alleges the existence of any fact bears the duty to prove the same. This principle is gathered from sections 110, 112, and 115 of the Evidence Act, Cap 6 RE 2022, and judicial precedents, 10 including Manager NBC Tarime vs. Enock M. Chacha (1993) TLR 228. In this case, the parties mutually agree that in November 2022, an agreement was executed (Exhibit P1) wherein the Appellant agreed to supply the Respondent with a vehicle, specifically a Ford Eco Sport Auto Transmission with chassis No. MAJBXXMRKBFU22535, for the sum of twenty-six thousand one hundred and twenty United States Dollars (USD 26,120.00). It was agreed that the Respondent would pay 30% upfront, while the remaining balance would be paid in installments over eleven months. It is also undisputed that the vehicle was properly handled and delivered to the Respondent for her use. The parties also agree that in October 2023, the vehicle taken to the Appellant for maintenance was returned to the Respondent. On 10th November 2023, the vehicle suffered another severe blow, causing the engine to stop working permanently, which led to the Appellant replacing the engine. After replacing it, on 24th January 2024, the Respondent was required to collect the repaired vehicle; however, she refused, claiming she was no longer interested in it. She alleged a breach of contract. The Respondent's case establishes that the Appellant breached the sale contract (Exhibit P1) by supplying a vehicle that was not brand new. 11 Had it been the new one, it could not have experienced an engine failure within a short period of time. The Appellant's case established that the vehicle in question was brand new and had 38 manufacturer’s test kilometers. It was contended that being a brand-new vehicle does not mean that it cannot experience mechanical failure leading to the engine replacement. In his evaluation as to whether there was a breach of contract, the trial Court had this to say; I say so because, CMC Automobile Limited made a representation to VGK Company Limited, at the time of executing the sale agreement for the car Ford Eco Sport, that the car was brand new, as guaranteed in the warranty. As such, the total damage of the car’s engine purported to be brand new, during the period of warranty and in a period of less than twelve months from the car was purchased, amounts to fundamental breach of the sale agreement which the Plaintiff VGK Company Limited executed under belief that the car Ford Eco Sport it purchased was brand new. As prefaced, it is not disputed that the parties executed an agreement in which the Appellant agreed to supply a vehicle to the Respondent at the agreed price of twenty-six thousand one hundred and twenty United States Dollars (USD 26,120.00). When the parties executed the agreement, the vehicle had only 38 kilometers on it. According to PW1, the vehicle was selected at the Appellant’s 12 showroom, and Lilian told them that it was a brand-new vehicle. According to the records, the vehicle was in use by the Respondent (PW2) for approximately eleven months from the date when it was handled to her. The assertion that it was not a brand-new vehicle came into play sometime in January 2024 when the Appellant replaced the collapsed engine with a new one. With respect, the Respondent is estopped from claiming that the vehicle was not a brand-new one because of engine failure after a lapse of approximately eleven months. Had that been the case, the Respondent could not have taken it and stayed with it for eleven months. The Appellant’s evidence that it had 38 kilometers on it when the agreement was executed was not challenged. Even for the sake of argument that it was not a brand-new vehicle, the evidence that the Respondent used it for 16,572 kilometers was also not challenged by the Respondent's case. The argument that it was not brand new is, therefore, an afterthought and, apart from engine failure, is not backed by any evidence. According to the DW1’s testimony, the vehicle was registered for the first time in Tanzania on 6th December 2022 in the Respondent’s name. His evidence was corroborated by Exhibit P2 13 (Registration card), which was tendered by PW2. According to the registration card, there was no previous owner before the Respondent was registered as the owner. In that respect, I am not prepared to believe that the Tanzania Revenue Authority (TRA) is also involved in this saga if I have to agree with the Respondent. Even Exhibit D1, which both parties signed, indicates that the vehicle had only 38 Kilometers when sold to the Respondent. As said before, the Respondent used the vehicle for approximately eleven months. When it was handed to her, it had only 38 manufacturer’s test kilometers. It was not disputed that when it was handled to the Appellant, it had moved approximately 16,572 kilometers. That means the Respondent traveled with it for approximately 16,534 kilometers, equal to traveling from Dar es Salaam to Mwanza more than ten times. All the time, the Respondent never claimed to have been supplied with a used or non-brand-new vehicle. With those few remarks, I disagreed with the learned trial magistrate that the vehicle supplied to the Respondent was not brand new. I agree with my own findings that what was supplied to her is what both parties contemplated at the time of execution of the 14 contract. Had the trial Court correctly evaluated the evidence on record, it could have resolved as such. To that end, the first ground of appeal is meritorious, and I proceed to allow it. It is undisputed that the vehicle, regarded as brand-new, experienced total engine failure. Seeing that, the Appellant replaced the collapsed engine with a new one imported from South Africa. It is on record that the engine replacement was done at the manufacturer’s costs because a warranty covered the vehicle. When the replacement was done, the Respondent refused to collect the vehicle because she was no longer interested on it. She requested to be supplied with a new one, even if it would require a top-up amount. It must be noted that a complete engine failure does not necessarily mean that the vehicle was not brand-new. It is a mechanical failure that any machine may encounter even before it is released to the user or agent. Sometimes, it happens to a single unit, model, or batch of vehicles. It is even normal for a particular manufacturer to recall the vehicles already in use if any mechanical problem is discovered. For instance, Ford Motor Company recently recalled 15,355 Bronco Sports (2021–2023 models) and 18,221 Escapes (2020–2022 models) due to a possible fuel leak. The 15 Company also recalled 91K EcoBoost Models over potential engine failure (see www. Caranddriver.com) (see also National Highway Traffic Safety Administration website). In such circumstances, the trial Court erred by holding that a complete engine failure of the vehicle regarded as brand new was a breach of the contract. In my conviction, there was no breach by the Appellant. The engine failure not contemplated by the parties during the execution of the agreement cannot be regarded as a breach of the contract. In fact, I see no correlation between the execution of the contract and the engine failure that happened after a lapse of approximately eleven months. I would have resolved otherwise had the Appellant contemplated such failure when executing the agreement. In the absence of any evidence to the contrary, I cannot associate myself with such assertion. That said, the second and fourth grounds of appeal have merit, and I allowed them. Arguing on the third ground of appeal, Mr. Tarimo complained that the trial Magistrate erred in law and fact by failing to understand the concept of warranty and its applicability in business transactions. On his part, Mr. Mafie argued that the trial Court conceptualized the idea of warrant and its applicability. 16 Indeed, according to J.C. Smith in his book titled “the Law of Contract,” for many years, writers have regarded a promise as either a condition or a warranty. If it is a condition, a breach would entitle an injured party to terminate the contract and claim damages. On the other hand, a warranty entitles the injured party to damages only (see page 130). According to N.N.N. Nditi in his celebrated book titled “General Principles of Contract Law in East Africa”, where the parties have classified a statement as a warranty, it means it is a minor term of the contract breach of which does not entitle the non- breaching party to repudiate the contract. The non-branching party can only sue for damages (see page 212). In that respect, a warranty is always a minor term, and when breached, the injured party may sue for damages. He cannot be entitled to repudiate the contract. A party breaching the warranty term is not said to have violated the agreement. Auto manufacturers typically provide warranties when a new vehicle is purchased. These warranties usually cover certain issues due to the defect or failure and last for a certain period or until a specified number of miles or kilometers have been driven. Manufacturer warranties often seem like a convenient, logical choice 17 at first glance. They originate from the company that created the vehicle, so it’s easy to assume they would offer the most complete protection. However, this is often not the case. These warranties usually cover the bare minimum, such as defects arising from workmanship or materials. They frequently don’t consider everyday mishaps, accidental damages, or common issues with time and regular use. In this case, the parties executed a sale agreement for the brand-new vehicle. In addition, they executed a Warranty Service Guide (Exhibit D1). Reading from it, the warranty start date was 30th November 2022, while the signature date was 15th November 2022. The vehicle’s mileage by then was 38 kilometers. The warranty covers premium maintenance and an essential service plan, and it would only last for 36 months or 60 kilometers, whichever comes first. The premium maintenance plan covered the engine accessories including; cylinder block and all internal lubricated parts, seals and gaskets, the cylinder heads, manifold (Exhaust and Intake), manifold and bolts, factory installed turbocharger/supercharger units, timing chain (gears or belt), flywheel, valve covers, oil pan, timing chain cover, oil pump, water pump, thermostat and thermostat housing. 18 It is on record that the complete engine failure happened on 10th November 2023, the day the vehicle was taken to the Appellant for maintenance. Having diagnosed it, it was learned that the vehicle encountered a complete engine failure. As a result, a new engine was installed in the vehicle at the manufacturer’s cost because it was still under the warranty. In the first place, I concur with Mr. Tarimo that the Appellant was entitled to maintain the vehicle to the extent of replacing the engine. This is because the vehicle experienced such mechanical problems when it was still under warranty, and the engine defect was covered by it. In the premises, I disagree with the learned trial Magistrate that the warranty never covered the engine. I don’t see any wrongdoing committed by the Appellant merely because she maintained the vehicle to the extent of changing the engine. As said before, the warranties usually cover defects or failure and last for a certain period or until a specified number of miles or kilometers have been driven. To that end, I find the third ground of appeal meritorious, and I allow it. From what I have tried to endeavor hereinabove, I find no reason to address my mind on the fifth ground of appeal. Since I have 19 already resolved that there was no breach of contract, I find it academic to tackle the issue related to general damages. In any case, the award of general damages was unjustifiable in the circumstances. Agreeably, the fifth ground of appeal is meritorious. Before I sign off, I have this to say. First, it is on record that the vehicle is currently under the possession of the Appellant. From what I have resolved hereinabove, I find it necessary that the same be handled to the Respondent immediately. The circumstance of this case calls for a rescheduling of the warrant duration. Similarly, to maintain the business relationship, the Appellant may reconsider rescheduling the payment of the last installment without interest. Since there is no dispute that the vehicle was under maintenance from 10th November 2023 to 24th January 2024, when the maintenance was over, the Respondent is entitled to a rental reimbursement of USD 30 per day for 75 days. This is in accordance with the terms and conditions of the warranty (Exhibit D1), which the parties agreed to honor. In the upshot, this appeal is hereby allowed. The Judgment and Decree of the trial Court are hereby reversed and set aside. The Appellant is hereby ordered to hand the vehicle over to the 20 Respondent immediately in the same condition it was in on 10th November 2023, save for the changes resulting from the maintenance. The Respondent is entitled to the rental reimbursement costs as observed hereinabove. Considering the circumstances, there will be no order regarding costs. It is so ordered. Right of appeal explained. DATED at DAR ES SALAAM this 3rd April 2025. H.S. MTEMBWA JUDGE 21